Reach Resources has moved its Murchison South project closer to mining after Andel exercised its option over the Blue Heaven tenement, while grade-control drilling returned shallow, high-grade gold. The proposed development remains conditional on regulatory, environmental and commercial milestones.
- Andel exercised its option and entered a binding Right to Mine Agreement for Blue Heaven
- Andel is to fund pre-mining, mining, haulage and processing costs upfront, subject to remaining conditions
- Grade-control drilling returned 7 metres at 7.5 g/t gold from 20 metres
- Three prospecting licences expanded Reach's Murchison South footprint after quarter-end
- $5.054 million cash balance at 30 September, equivalent to 3.43 quarters of funding on reported outflows
Andel agreement moves Blue Heaven towards development
Reach Resources Limited (ASX:RR1) has cleared a significant commercial hurdle at its Murchison South Gold Project, with Andel Resources completing due diligence and exercising its option over the Blue Heaven tenement, M59/769. The move converted the arrangement into a binding Right to Mine Agreement, although mining cannot yet proceed under the agreement until several remaining conditions are satisfied.
The structure gives Reach access to a funded development pathway without committing its own cash to the upfront mining bill. Subject to the outstanding conditions, Andel will fund pre-mining, mining, haulage and processing costs, recover those costs from gold revenue and split net project profits with Reach 50/50 on an at-cost, open-book basis. The arrangement covers Blue Heaven only, with ore intended for Andel subsidiary Gylden Resources' Kirkalocka mill about 75 kilometres away.
The commercial framework was previously described as a fully funded mining arrangement when Andel exercised its option to enter the deal. The latest filing confirms the option has now been exercised and the Right to Mine Agreement is executed, but the distinction matters: FIRB approval, execution of mining services, toll milling and ancillary agreements, and an independent environmental baseline audit remain outstanding. A toll milling agreement with Kirkalocka has yet to be agreed.
Grade-control drilling delivers high-grade shallow intersections
While the commercial machinery advances, the drilling has produced the kind of near-surface numbers that can influence an open-pit mine plan. The 163-hole reverse-circulation grade-control program tested the first five proposed mining benches at the NW Pit on a tight 10-metre by 10-metre grid. Best results included 7 metres at 7.5 g/t gold from 20 metres, including 2 metres at 24.6 g/t, and 15 metres at 2.2 g/t from 2 metres, including 2 metres at 13.2 g/t.
The program also returned 24 metres at 1.2 g/t from 7 metres and several other broad, near-surface intervals. Assays were available for about 75% of the program when Reach reported the results, with nine holes returning intervals above 5 g/t gold and results from the remaining 40 holes expected in November. Reach said the tighter drilling supported the geometry and continuity of the mineralised envelope, while identifying higher-grade or wider zones, including an area previously modelled as low grade. The results add detail to the proposed mine schedule; they do not by themselves establish a production outcome.
The drilling update follows earlier high-grade drilling, which highlighted the same 2-metre interval at 24.6 g/t gold within the 7-metre intercept. Reach has also completed about 2,000 metres of step-out reverse-circulation drilling along extensions of the Primrose Shear and around old workings south-east of the proposed pits, targeting potential resource growth and additional feed for Kirkalocka.
Footprint expands around Pansy and Shamrock
After quarter-end, Reach signed agreements to acquire prospecting licences P59/2210, P59/2408 and P59/2411. The licences adjoin the Pansy Pit and sit immediately south-west of the Shamrock deposit, securing ground that could allow the Maranalgo Road to be realigned. Reach said that corridor could support a larger and deeper Pansy pit if the company elects to develop it.
The acquisitions also cover extensions of the Primrose Shear and mapped quartz veins. Consideration totals $45,000 in cash and 3,936,620 shares, subject to completion and transfer documentation. Reach plans first-pass mapping and rock-chip sampling before deciding which targets merit future drilling.
Cash position leaves development dependent on execution
Reach ended September with $5.054 million in cash, down from $6.531 million at the start of the quarter. Operating cash use was $590,000 and exploration and evaluation spending added $885,000, producing total relevant outgoings of $1.475 million for the quarter. On that reported spending rate, the Appendix 5B calculated 3.43 quarters of available funding, with no financing facilities drawn.
That balance provides time for the next project milestones, but the investment case now turns on execution rather than headlines: the remaining Right to Mine conditions, the Mining Proposal, final grade-control assays, mine scheduling and the proposed toll-milling arrangements. Reach's own filing cautions that the pit shells remain conceptual, are not based on a scoping, pre-feasibility or feasibility study and do not constitute a production target under ASX rules.
Bottom Line?
The project now has a funded mining pathway and encouraging shallow drilling, but Blue Heaven remains a conditional development story until approvals, project agreements and final mine planning are completed.
Questions in the middle?
- When will FIRB approval and the mining services, toll milling and ancillary agreements be completed?
- Will the remaining 40 grade-control holes confirm the higher-grade and wider zones identified in the first 75% of assays?
- Can the expanded ground around Pansy and Shamrock translate into a larger mine plan rather than simply a larger exploration footprint?